With the dust almost settled following the shock result of the 2015 General Election, the construction industry is preparing for possible “economic uncertainty” as the new Conservative Government prepares for the next five years of Parliament.
In a result that went against the polls, the Conservatives romped to a 12-seat majority victory over the Labour Party, which only managed to win 232 seats to the Tories’ 331. With the Scottish National Party (SNP) taking 56 of the 59 seats in Scotland and the Liberal Democrats reduced to just eight MPs, David Cameron has taken charge of the first fully Conservative cabinet for 18 years.
Following an election campaign that saw housing and energy efficiency rise to the top of the political agenda, the construction industry is likely to benefit in the short term from the formation of a stable Government. Uncertainty surrounding the outcome of last week’s vote (May 7) has dominated the most recent surveys of activity in the industry, with the latest PMI from Market and the Chartered Institute of Purchasing & Supply (CIPS) showing UK construction hit its lowest level of growth for almost two years in April 2015.
This was also reflected in the Glenigan Index for May – covering the value of projects starting on site during the three months to April – which showed a decline of 11%.
Many cited the General Election as a main cause of this, with developers holding off on decision-making until after the General Election. However, with this now decided, it is expected that growth will return to normal levels.
Allan Wil‚n, economics director for Glenigan, said: “With the votes now cast and the Conservatives set to form the next Government with a small majority, the short term political uncertainties have now eased.”
This is likely to be felt particularly in the house-building sector, which has driven the resurgence in construction over the last several months. Despite activity dropping to a 22-month low in April 2015, the continuation of efforts from the Conservative party is likely to ensure growth returns to the sector.
Guy Grainger, UK chief executive of Jones Lang LaSalle (JLL), said: “The continuity of main policy objectives for the past five years will be very helpful for investors and developers in the housing market. Residential markets will benefit from a legacy of supportive policy from the Coalition Government. We expect markets to continue to grow in line with stronger economic prospects, particularly in the regional cities and the South East.”
However, short-term uncertainties are likely to be replaced by more long-term concerns, with the Conservatives’ EU referendum and the possibility of a fresh vote on Scottish independence casting a long shadow over the next few years.
Mr. Grainger continued: “While most in business will be reassured by the continuity of the Conservative economic plan, there are concerns regarding the planned referendum on British membership of the EU in 2017. British businesses will remain committed to a strong position within the European Union and will need to engage in the reform debate to see if a referendum can be avoided.
Mr. Wil‚n added: “The economic uncertainty posed by the European Referendum, in particular, is a potential threat to private sector investment over the next two years.”
With uncertainty likely to build between now and when the in/out referendum is held – which could be as early as 2016 – the new Conservative Government has other issues to